Recurrent funding

Total government contribution

Of the two broad categories of government funding to schools, recurrent and capital, recurrent funding, which supports the ongoing operating expenses of schools, is by far the most significant.

Although Independent schools depend primarily on private sources for their recurrent income, government funding is a significant and necessary component of the income of virtually all Independent schools in Australia.

For the sector as a whole, about 45 per cent of school income came from government sources in 2015. However, the amount of government funding which individual Independent schools receive varies widely.

In Australia’s federal system of shared responsibilities, the Australian Government has taken the primary role in providing government funding for non-government schools, while state and territory governments are the primary source of support for government schools. Conversely, state and territory governments generally contribute much lower levels of funding to non-government schools, and the Australian Government provides a lower share of the government funding for government schools.

In 2014-15, Australian governments, both Commonwealth and state and territory, spent a total of $52.5 billion on school education. As the table below shows, $40.3 billion of this public investment went to government schools and $12.3 billion went to non-government schools.

Recurrent funding for school education, 2014-15 ($ billion)

Source: Productivity Commission ‘Report on Government Service Provision’ and Australian Government Department of Education

In 2014-15, some 65 per cent of school enrolments were enrolled in government schools, which received 77 per cent of total government expenditure on schooling. In comparison, non-government schools accounted for 35 per cent of enrolments and 23 per cent of total government expenditure. Forty one per cent of non-government sector students are enrolled in Independent schools.

Enrolments and government funding by sector, 2014-15

Source: Productivity Commission ‘Report on Government Service Provision’ 2017 
and ABS Schools Australia 2016

On an individual student basis, total government spending in 2014-15 on each student in government schools averaged $16,670, while in non-government schools (both Catholic systemic and Independent schools) this was $9,843 per student. Average government expenditure on students in Independent schools is estimated to be about $8,450 per student, or 51 per cent of the average spending per student in government schools. As the table below shows, Independent school students receive considerably less government funding than their counterparts in government schools.

Average per student government funding by sector, 2014-15

Source: Productivity Commission ‘Report on Government Service Provision’ and Australian Government Department of Education

Most of the costs of schooling in the Independent sector are met from the fees paid by parents. It is estimated that the total saving to government expenditure from students attending non-government schools in 2014-15 – both Catholic systemic and Independent schools – was $8.8 billion, and the saving from Independent schools alone was $4.4 billion. This is based on a calculation of the amount that would be required from taxpayer funds if all Independent school students attended government schools where they would be fully publicly funded.

General recurrent funding

A new funding model was introduced in 2014 under the Australian Education Act 2013 for Australian Government funding for non-government schools. The new arrangements have implications for state and territory government funding.

Once fully implemented, under the new Schooling Resource Standard (SRS) funding model Australian Government recurrent funding is provided as a base grant with additional loadings aimed at addressing disadvantage. The latter funding is directed towards the support of particular groups of students, such as students with disability, students with low English language proficiency and indigenous students.

The transition arrangements for the SRS funding model were for the model to be phased in between 2014 and 2019. The likelihood is that full implementation, set for 2019, will not occur as the present commitment of resources is for four years (2014 to 2017) only. Considerable uncertainty attaches to arrangements for non-government school funding beyond 2017, and several of the loadings are to be reviewed prior to 2017.

Base funding

The per student base funding component of the new funding model is calculated as a Schooling Resource Standard (SRS), intended as a measure of the cost of effective and efficient provision of schooling. The SRS is a measure of the resources used by high achieving schools, identified by their performance in the National Assessment program – Literacy and Numeracy (NAPLAN) and excludes any measure of disadvantage.

Government schools are entitled to receive the full amount of the SRS. The SRS amount for non-government schools is adjusted according to a measure of ‘capacity to contribute’, determined by a measure of the school community’s socio-economic status (SES). Differential measures for capacity to contribute have been introduced for primary and secondary schools. As the table below shows, schools with a higher SES score will receive a lower level of per capita base funding.

‘Capacity to contribute’ settings for non-government schools, 2015

Source: Australian Government Department of Education

Some non-government schools, such as special schools, special assistance schools, majority indigenous student schools and remote ‘sole provider’ schools will also be entitled to receive the full SRS per student amount if and when the model is fully implemented.

The SRS base amount will be indexed annually by 3.6 per cent to reflect estimated increases in the costs of all schools.

Loadings for disadvantage

The funding model, once fully implemented, will include a component of loading to address specific areas of educational disadvantage. The six specified areas of disadvantage addressed through loadings are:

  • Size (to take account of the particular circumstances of small schools, and schools outside metropolitan areas)
  • Location (based on Accessibility/Remote Index of Australia (ARIA))
  • Low SES background (this applies to the lowest 50 per cent of students using the Socio-Educational Advantage quartiles which are a component of the Index of Community Socio-Educational Advantage (ICSEA))
  • Students with disability
  • English language proficiency (Disadvantaged LBOTE)
  • Indigenous students

While all loadings are to be fully publicly funded, they are subject to transition arrangements.

Funding uncertainties

Many uncertainties and considerable complexity attach to the implementation of the new funding arrangements, affecting the capacity of individual schools to understand and predict their future government funding levels. Consequently schools are limited in their capacity to undertake necessary financial and educational planning.

Transition Arrangements – Initial intentions for the new funding model involved a 6 year transition period, from 2014 to 2019. The aspiration was that by 2019, most states and territories were expected to be at 95 per cent of the SRS with the bulk of additional funding to be available to schools in the last two years of the transition. The Coalition Australian Government commitment is to the first four years of funding only, 2014 to 2017. Funding levels, and the approach to funding non-government schools beyond the current quadrennium, are yet to be determined.

Calculation of SRS entitlement – Schools which would receive more funding under the SRS model are regarded as being ‘below the model’. These schools receive their pre-SRS Australian Government funding indexed at 4.7 per cent and a percentage of the additional funding they are entitled to under the SRS.

Schools which would receive less funding under the SRS model are regarded as being funded ‘above the model’. So that these do not lose funding in real terms, they receive 3 per cent indexation every year until their public funding meets their SRS entitlement.

New Independent schools will be funded at their SRS entitlement i.e. base funding discounted for ‘capacity to contribute’ plus relevant loadings for disadvantage.

State-territory differences – State and territory government funding made up about 25 per cent of total government recurrent funding for Independent schools in 2014. While the amount of funding provided by each state and territory government to the non-government school sector varies, the contribution is significant to individual schools, and in many cases is crucial to their financial viability.

Up until 2014, state and territory governments determined both the total amount of their funding to be allocated to the non-government school sector, and the eligibility and level of funding of individual non-government schools.

Under the new funding arrangements, some state and territory government funding will depend on arrangements negotiated between state and territory governments and the Australian Government. However most state and territory governments will continue to fund schools according to their own methodologies.

System funding – Under the new funding model, non-government school systems, including systems in the Independent sector, have been able to choose to use a  student-weighted average SES score to calculate their entitlement to government funding and are required to have an approved needs-based funding arrangement for the distribution of funds to schools. This means that systems retain the ability to re-distribute funds internally.

Review of arrangements – Several elements of the new school funding arrangements were reviewed in 2014. These included a review of the regulatory burden of the funding legislation, and specific reviews of the calculation of loadings for English language proficiency and low SES background.  While the Australian Government has indicated that it is not intending to make major changes to school funding arrangements prior to 2018, these reviews, along with a general Australian Government inquiry into federalism, have the potential to affect schools’ funding entitlements and arrangements from 2018.

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